That's not true at all. One example (there are more): Say a student cheats at Foo University and then gets a job at a physics lab. They clearly don't know the m

That's not true at all. One example (there are more): Say a student cheats at Foo University and then gets a job at a physics lab. They clearly don't know the material that they purportedly got good grades studying. Now say, for the sake of the argument, that this happens a few more times. As a hiring manager at the lab I'm going to be less likely to seriously consider candidates from Foo University (because all of the 4.0 graduates I've hired from there don't know anything). Others will live need to work harder to overcome this bias because of the action of the cheaters. It's very myopic (and a very difficult position to seriously hold unless you're rationalizing past behavior) to assume that cheating doesn't hurt anyone.